When central planners in a command economy end up having a huge surplus of shoes and widespread shortages of bread in their economy, they have failed to attain
A) productive eﬃciency.
B) allocative eﬃciency.
C) minimum opportunity costs.
D) maximum process and revenues.

Question

Quizplus · Accepted Answer

The situation described in the question where there is a surplus of shoes and a shortage of bread demonstrates a failure to achieve allocative efficiency. Allocative efficiency is the optimal distribution of resources to maximize overall social welfare, which includes producing the combination of goods and services that people actually want and need. In this scenario, the central planners have misallocated resources by producing too many shoes and not enough bread, which suggests that they failed to identify and fulfill the needs and wants of their consumers.

When Central Planners in a Command Economy End Up Having